Do You Need an Escrow Agent for Real Estate Transactions in Costa Rica?

Do you really need an escrow agent when purchasing property in Costa Rica?

One of the most common questions when foreigners invest in real estate is if money goes directly to the seller or not. To this, I always respond that it’s super easy to give money away, but then getting it back… not so much.

Therefore, we always advise an escrow company for real estate dealings. Here’s what you need to know:

How Does Escrow in Costa Rica Work?

The escrow agent is an independent third party that receives assets of any kind, normally cash, but nowadays it can be a digital asset, like crypto, under specific terms and conditions.

Making sure you have the right escrow company for you is in your benefit.

Retaining the services of an escrow agent implies execution of an escrow agreement that defines the terms and conditions under which a specific transaction is executed. It guarantees that each of the contracted parties will receive exactly what is agreed upon. Escrow accounts are useful for investors to move money to Costa Rica and secure its availability prior to purchasing property or during negotiations.

The escrow account can also serve as a private account to keep funds available prior to opening a personal or corporate bank account at a Costa Rican bank.

A well drafted escrow agreement should include the following:

• The terms and definitions relevant to the transaction.
• The terms and conditions of the sale on purchase agreements.
• Clear instructions on the escrow funds, such as acceptable use and release conditions. (It is key to regulate if the release of funds requires mutual consent.)
• The escrow agent fees, as well as duties and obligations that must be met.
• The law applicable to the transaction and the jurisdiction in case of a claim.

What Is Required To Open an Escrow Account in Costa Rica?

Normally, each escrow company will have its own set of requirements. The standard requirements to open an escrow account are the following:

• Know your client forms from the person or entity funding the transaction.
• A copy of the depositor’s identification documents, such as driver’s license and passport.
• A copy of the depositor’s tax returns for the last two or three years showing proof of income.
• Bank statements for the last three to six months from the account funds are coming from. (This can be a checking, savings, investment, or brokerage account.)
• Letter of reference from the banking institution the money is coming from
• Execution of an escrow agreement provided by the escrow agent of choice
• If the funds are coming from specific activities such as loans, sale of property, sale of a company, and inheritance, you may need to present copies or originals of these documents.
• Nowadays escrow companies are requesting a CPA certification issued by a Costa Rican accountant certifying the source of the funds as per valid local regulations.

Remember to always choose an escrow company with a track record and be wary of any company that is too flexible on the escrow requirements or that does not require the basic documents indicated above.

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Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended to constitute legal advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change. For the most accurate and up-to-date information, please contact our office directly. Some images may be AI generated.